Consumer Law & Policy Blog

Consumer complaints about Equifax

Equifax was the subject of more complaints to the Consumer Financial Protection Bureau than any other financial services company in all but one state in 2017, according to an analysis of agency data published Thursday. In every state but North Dakota, more residents complained to the CFPB about the credit reporting company than any other firm.

The Hill reports on the analysis here. The LendEDU analysis is here.

H&R Block Offering Update for its Tax Software at $24.95 But Others Get the Same Software for $9.95

by Jeff Sovern

A friend forwarded me the two images below.  My friend, a prior H&R Block customer, received the 2017 software update for $24.95 while his son, who has not used the software in the past, was offered the identical

software for $9.95. This type of price discrimination always makes me wonder about whether there is disparate impact discrimination going on; here, for example, the older customer pays more than twice what the younger consumer does.  

Trump Administration Seems Likely to Weaken CRA Rules

by Jeff Sovern

The WSJ has an interesting story out, Trump Administration Seeks to Change Rules on Bank Lending to the Poor, that reports:

Community groups say the law should be expanded in order to bring opportunity to more low-income areas, while banks say they would do a better job of helping these people if the law became more flexible and less bureaucratic.

“Community groups don’t like the way CRA is today, the banks don’t like the way CRA is today, and regulators don’t like it,” said Comptroller of the Currency Joseph Otting, whose agency is also planning changes to the way it regulates banks’ compliance with the law. “I have a very strong viewpoint of how to fix this.”

So you might think that Otting's fix will involve both something for community groups and something for banks. Well, maybe, maybe not. The article also explains the changes "could make it easier for banks to meet certain lending requirements and lower penalties for compliance problems." We don't know what the changes will be, but already some alterations have been made. As an example, the article notes:

During the Obama administration, officials penalized banks’ CRA grades for a wide range of alleged misconduct, including issues with overdraft charges and allegedly discriminatory auto loans made by car dealers.

* * *

In October, Mr. Otting’s predecessor Keith Noreika, a Trump administration appointee, changed OCC policies to make it much harder for banks to be downgraded for these reasons not directly tied to CRA lending.

It would be great if the changes provided greater consumer protection, but I will believe it when I see it. The article also discusses the possibility of including as "community development" loans transactions that don't solely help the poor and are for small businesses.

Consumer Advocates Charge Mulvaney's Freeze on Data Collection is a Ploy to Cripple the CFPB

by jeff Sovern

The American Banker has the story, in a report headlined Is CFPB’s data freeze about security or a political ploy? The article quotes Minnesota's Prentiss Cox, as saying "This is a very thinly veiled attempt to shut down fraud enforcement, which is consistent with the not-even-veiled priority agenda item of the congressional Republicans to eviscerate the CFPB." Senator Elizabeth Warren wrote to Mulvaney to protest the freeze last week, saying:

CFPB cannot fulfill its core functions without collecting personally identifiable information. * * *  CFPB bank examiners and enforcement lawyers regularly use account level data provided by regulated institutions to detect improper and unlawful activity. Likewise, the Office of Fair Lending collects and analyzes data to bring lawsuits against financial institutions that discriminate against their customers.

The American Banker article also states:

In his directive, Mulvaney cited concerns about data security laid out in a May 2017 report by the Office of the Inspector General, which found that confidential and sensitive enforcement information was accessible by a wider circle of CFPB employees than was necessary and prudent. Mulvaney said that staff instead could access aggregate data.

* * * 

One unresolved question is why Mulvaney would take so drastic a step in response to a months-old Inspector General's report. Bank regulators - not to mention other government agencies like the Social Security Administration and Internal Revenue Service - deal extensively in highly sensitive personal information and have never been subject to such a drastic directive. Both the Office of Personnel Management and State Department were the subject of extensive security breaches in 2015 and neither were instructed to not collect personal data. 

Do consumer-law violations (or "inefficiencies") account for 10% or more of what consumers spend?

And would correcting these inefficiencies reduce income and wealth inequality? Read Consumer Law As Tax Alternative by Rory Van Loo to try to find out. Here's the abstract:

The law and economics paradigm has traditionally emphasized tax and transfer as the best way to achieve distributional goals. This Article explores an alternative. Well-designed consumer laws—defined as the set of consumer protection, antitrust, and entry barrier laws that govern consumer transactions—can make markets more efficient and lessen inequality. Policymakers and scholars have traditionally ignored consumer laws in redistribution conversations in part because consumer laws examine narrow and siloed contexts—deceptive fees by Visa or a proposed merger between Comcast and Time Warner Cable. Those are different microeconomic fields, whereas redistribution is dominated by macroeconomics. Even millions of dollars in reduced credit card fees seem trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article synthesizes the fragmented empirical literature quantifying inefficiently higher prices across diverse markets—called overcharge. To my knowledge, it is the first to conclude that consumer law-related inefficiencies plausibly overcharge more than a trillion dollars, or over ten percent of all that consumers spend. It also analyzes which households pay and earn income from that overcharge. Consumers outside the top one percent likely pay significantly more of their expenditures toward overcharge. A static simulation also indicates that removing consumer overcharge could bring the share of income earned by top one percent of households from twenty percent of all income today, possibly even bringing it to about ten percent, where it was in 1980, before the dramatic shifts that has caused so much concern. Moreover, this massive redistribution would be driven by laws making markets more competitive, rather than tax increases that distort markets. If the empirical literature currently available is right, consumer law merits serious consideration as an alternative to tax. 

District Court Rules for Mulvaney, Against English on PI Motion in CFPB Acting Director Case

The opinion is here.

Interim Bank Regulator Norieka: A Swamp Case Study

by Jeff Sovern

Last May, President Trump appointed bank lawyer Keith Norieka as interim head of the Office of the Comptroller of the Currency. Now that the full-time Comptroller has taken office, Norieka is returning to his firm "where he’ll consult large domestic and international banks on precisely the issues handled by the agency he recently led," according to David Dayen writing for The Intercept. Norieka may be best known to readers of this blog as a forceful opponent of the CFPB's arbitration rule. His knowledge about arbitration may come in part from having represented Wells Fargo in an arbitration case. Here's an excerpt from Dayen's story:

Banks were very happy with Noreika’s performance as OCC chair, he informed the Wall Street Journal. “I haven’t really even heard a negative word.”

Payday rule will protect, not harm, vulnerable consumers

That's the title of this opinion piece in the American Banker by William D. Gunter, former U.S. congressman and a former Florida state treasurer and insurance commissioner.

Can a standard clause in a settlement agreement be subject to the Consumer Review Fairness Act?

by Paul Alan Levy

After the Freehold Animal Hospital botched the neutering of a consumer’s dog, requiring the consumer to pay thousands of dollars for corrective surgery by a different hospital, the animal hospital agreed to refund the cost of its services as well as covering the expense of the corrective surgery, but only if the consumer agreed to a contract containing nondisclosure and nondisparagement clauses demanding that she keep the payment confidential, refrain from future criticism of the hospital, and remove all of her previous criticisms from social media. The clause was so broad that any action by the consumer that damaged the business (not coming back? not recommending the business to her friends?), could have been deemed a violation, subjecting the consumer to the possibility of litigation and an award of attorney fees.

The consumer was unwilling to do this, but the hospital insisted that this part of the deal was non-negotiable. Indeed, it told the consumer that such clauses are a standard part of its agreements to fix botched procedures, and confirmed that contention when contacted by Karin Price Mueller, consumer reporter for the Newark Star-Ledger. Mueller has the details in this article.   My own effort to reach the business for comment received no response.

Now, it strikes me as a sad commentary on this veterinary business that they apparently have so many problems with their professional work, leading to the need for financial settlements with its customers, that they need to have standard contract clauses for that situation. Be that as it may, my view is that there is a reasonable argument that the contract is subject to scrutiny under the Consumer Review Fairness Act, enacted by Congress late in 2016 and now fully in effect.

Senator Warren presses CFPB for details on freeze of data collection

Senator Elizabeth Warren on Friday sent a letter addressed to Mick Mulvaney, as Director of the Office of Management and Budget, and Leandra English, as Acting Director of the Consumer Financial Protection Bureau, expressing concern about Mulvaney's decision to freeze the collection of consumer data by the CFPB.

On December 4th, citing concerns by the Inspector General on the CFPB's information security controls, Mulvaney announced that he was freezing the collection of all personal information by the CFPB. He directed examiners at the CFPB to stop requesting any information from regulated entities. According to reports, enforcement lawyers may have also been banned from reviewing any new electronic evidence obtained in discovery.

Senator Warren's letter raises concerns about the impact of the data collection freeze on the agency's core functions.

The letter is here.